The Puerto Rico Department of the Treasury (the "PR
Treasury") issued Tax Policy Circular Letter No. 16-08 on
December 23, 2016 ("CL 16-08"). CL 16-08 establishes new
rules regarding the validity of retirement plan qualification
letters and the procedures that employers and service providers
must follow to request such qualification letters. It also repeals
PR Treasury's Circular Letter 11-10 dated December 16, 2011,
and Letter 13-02 dated May 28, 2013, which established guidance in
connection with procedures for plan qualification (the
"Previous Guidance"), to the extent not adopted by
reference in CL 16-08. The following is a summary of the changes
made to the rules and procedures for qualification of retirement
plans:

Validity of Qualification Letters

CL 16-08 provides that qualification letters issued under the
Puerto Rico Internal Revenue Code of 2011, as amended (the
"2011 PR Code") will continue to be valid as long as the
official plan document or trust agreement is not amended to add,
modify, or remove (in whole or in part) any plan provision
considered a "qualification amendment," as defined in CL
16-08.

As with the Previous Guidance, qualification amendments may be
adopted through a plan restatement or a separate plan amendment.
However, CL 16-08 clarifies that only plan restatements and/or plan
amendments that include amendments classified as
"qualification amendments" have to be submitted for
qualification. As a result, plan sponsors that have adopted a plan
restatement and/or amendments that do not include any
"qualification amendments" do not need to submit such
restatement for qualification. This relieves plan sponsors from the
obligation, under the Previous Guidance, to submit all plan
restatements for qualification.

What is a Qualification Amendment?

CL 16-08 provides clear guidance on what is a
"qualification amendment." This new guidance keeps the
qualification amendments of the Previous Guidance, but also adds
additional types of amendments that will be considered
qualification amendments. The additional qualification amendments
are:

Changes in the form or method for the
payment of benefits applicable to Puerto Rico participants;

Substitution of the plan
administrator, the trustee or the insurer of the trust (as
applicable), or the paying agent for Puerto Rico participants;

Changes in the official name of the
plan;

Changes in the employer
identification number (EIN) of the plan's trust;

Substitution of the master or
prototype plan sponsor adopted by the plan; and

Any other amendment to the official
plan document, trust agreement or other plan documents that the
Puerto Rico Treasury subsequently considers as a qualification
amendment through regulations, circular letter or administrative
determination.

CL 16-08 also provides that amendments not
considered qualification amendments under the Previous Guidance
will still be deemed not to be qualification amendments under
CL-16, and specifically clarifies that (i) amendments to add,
eliminate or change the rules regarding the payment of plan
administrative plan costs by the employer or participants or (ii)
changes in the name, organization or corporate structure that did
not result in a change in its employer identification number (EIN),
will not be considered qualification amendments.

Deadline to Request Qualification Letters

Pursuant to CL 16-08, plan sponsors of existing
plans who have already obtained a qualification letter
under Section 1081.01(a) of the 2011 PR Code (or have submitted a
request but have not yet received a determination letter), and have
adopted a restated plan or amended the plan to incorporate
amendments considered qualification amendments, must submit such
plan restatement and/or plan amendment for qualification no later
than the last day the plan sponsors or participating employers with
Puerto Rico participants have to file their income tax return,
including extensions, for the tax year of the employer during which
the restatement and/or amendment was formally adopted. Note
that CL 16-08 clarifies that the date that determines when the
request for determination letter must be submitted is the date of
the adoption of the qualification amendment, and not the effective
date of the plan restatement or amendment.

For new plans established after January 1,
2011, the request for qualification must be submitted no later
than: (i) the last day that the plan sponsor or participating
employer with Puerto Rico employees has to file its Puerto Rico
income tax return, including any request for extension, for the tax
year in which the plan was established or (ii) the year in which
Puerto Rico employees began participating in the plan, whichever is
later.

Documentation to be Included with the Request

CL 16-08 adds documentation and other information to what must
be submitted with a request for plan qualification. The additional
information documentation and information now required is:

Email addresses of the plan sponsor
and participating employers with Puerto Rico employees.

Plans that have a cash or deferred
arrangement must include the actual deferral percentage (ADP) test
for the year immediately prior to the date in which the request is
being submitted.

To the extent there are no
qualification amendments made to the trust agreement, a request for
qualification does not have to include a copy of the trust
agreement. If, however, the qualification amendments adopted only
amend the trust agreement (such as changing the plan's
trustee), a copy of the trust agreement, but not the plan document,
must be included with the request.

The qualification request must
specify the number of active and inactive participants in the plan
at the beginning of the plan year in which the plan is being filed
for qualification (the Prior Guidance required only that the plan
specify the number of participants). Because it was not clear
whether "participants" included inactive participants,
the general practice was not to include the number of inactive
participants.

As provided under the Previous
Guidance, if the plan or trust is being audited, examined or
investigated by the Internal Revenue Service, the United States
Department of Labor and/or the PR Treasury, the qualification
request must include a detailed explanation of the audit,
examination or investigation. However, CL 16-08 now requires that
the name, telephone number, email address, or any other reasonable
information available to contact the agent in charge of the
investigation or audit be included in the qualification
request.

Filing Fees

Retroactive qualification. Retirement plans in
effect as of January 1, 2011 (the effective date of the Code) that
have not yet requested a determination letter under the 2011 PR
Code will be considered non-qualified retirement plans. However,
such plans can request a retroactive qualification, to the extent:
(i) at the time of filing that request, the plan sponsor or
participating employer with Puerto Rico employees is not subject to
an audit, examination or investigation by the PR Treasury, the IRS
or the U.S. Department of Labor related, directly or indirectly, to
the qualification or operation of the retirement plan in Puerto
Rico, and (ii) the plan sponsor includes the filing fees
established in CL 13-02 (i.e., three times the administrative basic
fee and the additional fee of $150).

Regular qualification. In general, filing fees
for retirement plan qualification requests with the PR Treasury
remain the same, in accordance with the Regulation No. 8693, and as
provided in CL 16-08. However, retirement plans that have already
obtained a qualification letter under the 2011 PR Code (or that
have submitted a request that is still pending) can submit the plan
for qualification as a result of the adoption of one or various
qualification amendments after the deadline mentioned above, and
only pay an additional fee of $350, instead of the penalties
imposed under CL 13-02, which required three times the regular
filing fees.

CL 16-08 became effective on December 23, 2016. Therefore, plan
sponsors that are currently in the process of requesting a
determination letter as to the qualified status of their plans must
analyze, based on this new guidance, whether there is a need for
plan qualification and, if so, ensure that the request complies
with the new guidance provided in CL 16-08.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

On July 13, 2017, President Michel Temer approved Law No. 13,467, which amends the Brazilian Labor Code, as well as the laws regulating temporary work, the Severance Guarantee Fund...

Some comments from our readers…“The articles are extremely timely and highly applicable”“I often find critical information not available elsewhere”“As in-house counsel, Mondaq’s service is of great value”

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here

If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you
are granted a non-exclusive, revocable license to access the Website under its
terms and conditions of use. Your use of the Website constitutes your agreement
to the following terms and conditions of use. Mondaq Ltd may terminate your use
of the Website if you are in breach of these terms and conditions or if Mondaq
Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to
read the full text of the content and articles available (the Content). You may
not modify, publish, transmit, transfer or sell, reproduce, create derivative
works from, distribute, perform, link, display, or in any way exploit any of the
Content, in whole or in part, except as expressly permitted in these terms &
conditions or with the prior written consent of Mondaq Ltd. You may not use
electronic or other means to extract details or information about Mondaq.com’s
content, users or contributors in order to offer them any services or products
which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the
suitability of the information contained in the documents and related graphics
published on this server for any purpose. All such documents and related
graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or
its respective suppliers hereby disclaim all warranties and conditions with
regard to this information, including all implied warranties and conditions of
merchantability, fitness for a particular purpose, title and non-infringement.
In no event shall Mondaq Ltd and/or its respective suppliers be liable for any
special, indirect or consequential damages or any damages whatsoever resulting
from loss of use, data or profits, whether in an action of contract, negligence
or other tortious action, arising out of or in connection with the use or
performance of information available from this server.

The documents and related graphics published on this server could include
technical inaccuracies or typographical errors. Changes are periodically added
to the information herein. Mondaq Ltd and/or its respective suppliers may make
improvements and/or changes in the product(s) and/or the program(s) described
herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally
identifies you, including what sort of information you are interested in, for
three primary purposes:

To allow you to personalize the Mondaq websites you are visiting.

To enable features such as password reminder, newsletter alerts, email a
colleague, and linking from Mondaq (and its affiliate sites) to your website.

Mondaq (and its affiliate sites) do not sell or provide your details to third
parties other than information providers. The reason we provide our information
providers with this information is so that they can measure the response their
articles are receiving and provide you with information about their products and
services.

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to
view the free information on the site. We also collect information from our
users at several different points on the websites: this is so that we can
customise the sites according to individual usage, provide 'session-aware'
functionality, and ensure that content is acquired and developed appropriately.
This gives us an overall picture of our user profiles, which in turn shows to
our Editorial Contributors the type of person they are reaching by posting
articles on Mondaq (and its affiliate sites) – meaning more free content for
registered users.

We are only able to provide the material on the Mondaq (and its affiliate
sites) site free to site visitors because we can pass on information about the
pages that users are viewing and the personal information users provide to us
(e.g. email addresses) to reputable contributing firms such as law firms who
author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us
not to disclose your details to any of these parties, please tick the box above
or tick the box marked "Opt out of Registration Information Disclosure" on the
Your Profile page. We and our author organisations may only contact you via
email or other means if you allow us to do so. Users can opt out of contact when
they register on the site, or send an email to unsubscribe@mondaq.com with “no
disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate
registration form. This is a personalised service where users choose regions and
topics of interest and we send it only to those users who have requested it.
Users can stop receiving these Alerts by going to the Mondaq News Alerts page
and deselecting all interest areas. In the same way users can amend their
personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an
identifying user number. The cookies do not contain any personal information
about users. We use the cookie so users do not have to log in every time they
use the service and the cookie will automatically expire if you do not visit the
Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to
personalise a user's experience of the site (for example to show information
specific to a user's region). As the Mondaq sites are fully personalised and
cookies are essential to its core technology the site will function
unpredictably with browsers that do not support cookies - or where cookies are
disabled (in these circumstances we advise you to attempt to locate the
information you require elsewhere on the web). However if you are concerned
about the presence of a Mondaq cookie on your machine you can also choose to
expire the cookie immediately (remove it) by selecting the 'Log Off' menu option
as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example,
advertisers). However, we have no access to or control over these cookies and we
are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement,
and gather broad demographic information for aggregate use. IP addresses are not
linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or
its affiliate sites) are not responsible for the privacy practices of such other
sites. We encourage our users to be aware when they leave our site and to read
the privacy statements of these third party sites. This privacy statement
applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or
contests. Participation in these surveys or contests is completely voluntary and
the user therefore has a choice whether or not to disclose any information
requested. Information requested may include contact information (such as name
and delivery address), and demographic information (such as postcode, age
level). Contact information will be used to notify the winners and award prizes.
Survey information will be used for purposes of monitoring or improving the
functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our
site, we ask them for the friend’s name and email address. Mondaq stores this
information and may contact the friend to invite them to register with Mondaq,
but they will not be contacted more than once. The friend may contact Mondaq to
request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’
information. When users submit sensitive information via the website, your
information is protected using firewalls and other security technology. If you
have any questions about the security at our website, you can send an email to
webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode),
or if a user no longer desires our service, we will endeavour to provide a way
to correct, update or remove that user’s personal data provided to us. This can
usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will
post those changes on our site so our users are always aware of what information
we collect, how we use it, and under what circumstances, if any, we disclose it.
If at any point we decide to use personally identifiable information in a manner
different from that stated at the time it was collected, we will notify users by
way of an email. Users will have a choice as to whether or not we use their
information in this different manner. We will use information in accordance with
the privacy policy under which the information was collected.

How to contact Mondaq

If for some reason you believe Mondaq Ltd. has not adhered to these
principles, please notify us by e-mail at problems@mondaq.com and we will use
commercially reasonable efforts to determine and correct the problem promptly.

By clicking Register you state you have read and agree to our Terms and Conditions